The case study is from Management control systems: Performance measurement, evaluation and incentives. (3rd Edition) book. And the case study for this assignment is the Berkshire Industries PLC case on page 439.
The questions for the assignment are:
Use the data pertaining to the Snack Food Division, as shown in Exhibit TN-1, to calculate:
a.The economic profit for the division for 2000 and 2001;
bThe economic profit target for the division for 2001;
c.The division manager’s bonus payout (% of salary) for 2000 and 2001. (Assume that the slope of the payoff line for 2000 was arbitrarily set by Berkshire management to equal 1.0.)
2. Assume the base salary of the manager of the Snack Foods Division was ?120,000 in both 2000 and 2001. How much cash would the manager receive from his bonus payouts in 2000 and 2001?